This is a dumb question probably, but we running a dedicated server and I am fairly new to the Linux environment. Also: How sure can I be that ISP Config 3 will work?

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That is a downgrade not an upgrade. if ispconfig will work i dont know, but i know you can have php 5 and 4 installed in same machine.
And select php 4 or 5 to use, but ispconfig cant manage that, i think.